Could the approaching Fiscal Cliffs affect the Recovery

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Now that the election is over,  Wall Street and the media are starting to talk about the approaching fiscal cliffs and the impact they could have on the economy.

What fiscal cliffs are approaching?

– The current unemployment benefits and the payroll tax cut will expire soon, and not likely not get extended again.

– The Bush era tax cuts are also likely to expire this time around.

– The debt ceiling will need to be raised (again). If the Republicans and Democrats “play politics” and not compromise until the last minute, the ratings agencies may consider another down grade our debt rating.

– A pending increase on dividend and capital-gains taxes.

– The European debt crisis is once again in the news with the recent revision of their potential economic growth forecast. It has gone from a 1% grown estimate to virtually no growth estimate in Europe for 2013.

– Required defense spending cuts.

Could we go into another Recession?

We could but this time it will be much different. Our banking system is a lot stronger and real estate market has pretty much worked through a lot of inventory. Home values are starting to rise in most markets and a housing shortage seems very possible in a growing economy.

So what do I do?

Live within your means. If you do not own a home, buy a home as home values are lower and interest rates are at a near historic low. You will also gain a tax deduction from the interest on the home loan. If you own a home now, look to refinance and lower your monthly payment. Rates will rise if the United States credit rating is downgraded again, so low rates won’t be around forever.

Two things feel very certain.

  1. Rates are at historic lows and you will most likely never see this again in your life.
  2. The down side risk is very limited compared to the upside opportunity.

Whether you own a home now, looking to buy a new home, OR simply buy your first home, now is the time to take advantage of the lower home prices and historically low interest rates. If you are looking to buy or refinance a home in the state of Georgia, contact me and we can get started today.

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